South Africa's economic plan unlikely to boost growth - Fitch

Published 12:18 PM ET Wed, 19 July 2017
Reuters

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JOHANNESBURG, July 19 (Reuters) - South Africa's economic strategy released by Finance Minister Malusi Gigaba last week is unlikely to boost growth and many of the measures have previously been announced, ratings agency Fitch said on Wednesday.

Africa's most developed economy entered recession for the first time in a decade in March, while a bitter leadership contest in the ruling party and government corruption scandals have further dented investor confidence.

Gigaba last Thursday laid out a 14-point programme that included the possible sale of assets and partial privatisation of state-owned firms. The plan received a lukewarm reception from investors locally and abroad.

"The South African government's newly announced Inclusive Growth Action Plan is unlikely to significantly boost economic growth prospects," said Fitch, which rates the country's local and foreign debt a single notch below investment grade.

Fitch said it had halved its growth forecast for this year to 0.6 percent from 1.2 percent previously due to weak economic performance and ongoing political uncertainty.

Fitch, along with S&P Global Ratings and Moody's cut South Africa's foreign debt rating in April after President Jacob Zuma fired the widely-respected Pravin Gordhan and replaced him with Gigaba.

Fitch has warned that changes to mine ownership laws were proof that economic policy was tilting toward a radical, populist direction, despite assurances by Treasury that policy would remain unchanged.

The agency is also concerned about a proposed plan to build a fleet of nuclear power stations at a cost of up to 1 trillion rand ($77 billion).

"Government messages on the costly nuclear power plan have changed repeatedly and the issue is unlikely to be settled until after the electoral conference in December 2017 that will choose the new ANC head," Fitch said. ($1 = 12.9194 rand) (Reporting by Mfuneko Toyana; Editing by Joe Brock)